Select Staffing pre-packaged plan of reorganization confirmed by court

By Caroline Salls

Pittsburgh, May 8 - Select Staffing's pre-packaged plan of reorganization was confirmed on Thursday by the U.S. Bankruptcy Court for the District of Delaware.

The disclosure statement for the plan was also approved as part of Thursday's order.

The plan calls for a significant deleveraging of the Select Staffing debtors' balance sheet through the infusion of $225 million of new equity capital; the raising of $470 million of new debt, $350 million of which will be funded on the plan effective date; the satisfaction or other resolution of other liabilities and the contribution of additional staffing businesses by affiliates of the debtors' principal equity holder, Sorensen Trust.

The $225 million equity commitment will be completed through a $175 million rights offering and $50 million cash investment.

In addition, the company said when it filed bankruptcy that Credit Suisse and Royal Bank of Canada had been retained to arrange a new $350 million term loan and $120 million asset-based revolving loan facility, respectively.

The six-year senior secured term loan was subsequently increased to $370 million from $350 million and pricing reduced to Libor plus 650 basis points from Libor plus 700 bps, a market source said on April 25.

The company said the debtors intend to use the proceeds of the $225 million equity investment and the $350 million term loan to meet their plan obligations, while the $120 million asset-based revolver will be used to fund the debtors' working capital requirements and, if needed, to meet their plan obligations.

Plan treatment

Specific plan terms include the following:

• First-lien credit agreement claims will be exchanged for $365 million of cash and subscription rights allowing the holders to participate in the rights offering;

• Second-lien credit agreement claims will be exchanged for $12 million of cash and new warrants for the purchase of new common stock of the reorganized parent;

• Unsecured claims will be reinstated and paid subject to the terms and conditions of the claims;

• All existing equity interests in the parent company will be canceled; and

• Some of the Sorensen parties will receive new common stock in the reorganized parent in consideration for contributing new assets to the reorganized parent under a purchase agreement. These parties will also receive new common stock under a restricted stock award agreement, new common stock in connection with the conversion of related-party notes and an option to designate and purchase additional new common stock for $4 million of cash.

Select Staffing, a Santa Barbara, Calif.-based temporary staffing services provider, filed bankruptcy on April 1. The Chapter 11 case number is 14-10717.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.